Each month, we ask our freelance writers to share their prime concepts for dividend shares with you — right here’s what they stated for July!
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Diageo
What it does: Diageo is the brewer and distiller behind a bunch of premium drinks worldwide, from Guinness to Johnnie Walker.
By Christopher Ruane. With a 3.2% dividend yield, Diageo (LSE: DGE) may not seem like a scorching dividend share at first look.
However from the attitude of the way it can fund future dividend progress, I just like the share lots. It is a firm that has grown its payout per share yearly for nicely over three a long time. These should not tokenistic will increase, both: the dividend has elevated by 5% in each of the previous couple of years.
Excessive demand, premium positioning and distinctive merchandise give the corporate robust pricing energy. The enterprise mannequin generates sizeable free money flows: £1.8bn final yr alone. I due to this fact count on Diageo can increase its dividend for years to come back.
Weakening gross sales in Latin America concern me. They may foreshadow a broader slowdown in premium drinks demand as international financial weak spot bites. As a long-term investor, although, I believe the outlook for Diageo is promising.
Christopher Ruane doesn’t personal shares in Diageo.
HSBC
What it does: HSBC is a world financial institution with a presence in over 60 nations.
By Charlie Keough. I already personal HSBC (LSE: HSBA) shares however at their present worth, I’m extremely tempted to purchase some extra in July.
The star of the present is its 7.1% dividend yield. Final yr its payout grew by 97% to 61 cents per share. In its Q1 outcomes, it introduced a particular 21 cents per share dividend after promoting its Canadian enterprise. Accounting for that, the inventory yields a whopping 11.8%.
HSBC shares additionally look low cost. They commerce on 7.5 occasions earnings, comfortably under the FTSE 100 common. Its price-to-book ratio is 0.9.
The most important risk to the agency is its concentrate on Asia. A slowdown in Chinese language financial progress might overwhelm on the inventory within the months to come back.
However shifting previous that, I’m bullish on HSBC. Its shares are low cost, and its yield is excessive. That’s the kind of inventory I like to purchase. If I’ve the money, I’ll be including to my place this month.
Charlie Keough owns shares in HSBC.
Authorized & Common Group
What it does: Authorized & Common Group sells a variety of life insurance coverage, retirement and funding merchandise.
Authorized & Common Group (LSE:LGEN) shares have lengthy been common with traders searching for a unprecedented passive revenue. Following current heavy worth weak spot, it appears to be like much more interesting from a dividend perspective.
The FTSE 100 firm now carries an unlimited 9.5% dividend yield for 2024. And for 2025 and 2026, these figures enhance to 10.1% and 10.7% respectively.
Traders have been spooked by Authorized & Common’s intention to chill future dividend progress. It introduced plans in mid-June to boost annual payouts by 2% between 2025 and 2027, down from 5% beforehand.
I believe the market is overreacting right here. Not solely are dividends nonetheless anticipated to develop. However the monetary providers large plans to “return extra to shareholders” total by launching a collection of share buybacks. This begins with a £200m repurchase this yr.
There’s at all times an opportunity that Authorized & Common might battle to hit these targets if the economic system struggles and earnings endure. However a cash-rich steadiness sheet suggests the agency might nonetheless make good on its revised capital allocation coverage, even when earnings disappoint.
Royston Wild owns shares in Authorized & Common Group.
Phoenix Group Holdings.
What it does: Phoenix calls itself the UK’s largest long-term financial savings and retirement enterprise, with 12m prospects and £280bn of property beneath administration.
By Harvey Jones. Possibly I’m naive, however I simply can’t get previous the truth that FTSE 100 insurance coverage conglomerate Phoenix Group Holdings (LSE: PHNX) yields 10.2% right now.
I do know double-digit yields are extremely precarious, and I do know there are a couple of different causes to put money into the inventory, which is down 4.05% over one yr and 24.95% over 5. However I nonetheless thinks it’s a superb purchase
The market could be coming spherical to my standpoint, with the shares springing into life in current days.
What’s taken them so lengthy? I’ve simply run some figures, and Phoenix has a strong observe document of accelerating its dividend per share for the final decade. In 2014, it paid 36.75p per share. By 2023, that had risen to 52.65p.
In March, the board pledged to supply a “progressive and sustainable dividend coverage” going ahead.
Analysts count on the yield to hit 10.5% in 2024 and 10.8% in 2025. The enterprise is paying down debt, too.
No dividend is assured. Some traders will see this as a worth entice. The share worth might proceed to flounder. However I’m an optimist.
Harvey Jones owns shares in Phoenix Group Holdings.
